NSYS Nortech Systems Inc

Nortech Systems Inc. (NASDAQ: NSYS) today reported net sales of $29.6 million for the third quarter ended September 30, which includes $1.9 million of revenue recognized under new FASB accounting guidelines adopted this fiscal year. This compares with $28.3 million reported for the third quarter of 2017. On a pro forma basis to adjust for this change in accounting guidance, sales were $27.7 million for the third quarter of 2018.

For the nine months ended September 30, Nortech’s net sales were $84.5 million, which includes $4.2 million of revenue recognized under the new FASB guidelines. For the comparable period in 2017, net sales were $86.8 million.

Operating income for the third quarter was $649,000, compared with $284,000 for the third quarter of 2017. For the nine-month period, Nortech reported operating income of $1.3 million, compared with $500,000 for the same period in 2017.

Nortech Systems reported net income in the third quarter of $364,000, or $0.14 per diluted common share, compared with $43,000, or $0.02 per diluted common share, for the same period last year. For the nine months ended September 30, 2018, Nortech reported net income of $362,000, or $0.13 per diluted common share. This compares with net income of $13,000, or $0.00 per diluted common share, for the same period in 2017.

“We’re encouraged by our quarterly performance and continued profit improvement,” said Rich Wasielewski, Nortech Systems’ president and CEO. “Our customers remain optimistic and confident, influenced by a strong economy, an increase in defense spending and higher medtech investing.”

Nortech continues to face challenges related to electronic component shortages, which are expected to continue into next year. The company estimates these shortages had a negative revenue impact of approximately five percent in the third quarter, with profitability also affected by related inefficiencies in production and increased inventory levels. Nortech is working with its customers and supply chain partners to reduce this impact.

Two facility-related developments expected to provide long-term benefits are scheduled to conclude by year-end: the move of Nortech’s Monterrey, Mexico, operations into a new larger and more efficient facility and the relocation of the Devicix by Nortech medical device product development group to an expanded corporate headquarters building in Maple Grove, Minn.

“These improvements to our infrastructure and operations support our ongoing strategy of equipping the company for future growth and profitability,” concluded Wasielewski. He added that the company’s backlog position of $27.7 million – up double digits both sequentially and year-over-year – should help absorb investment-related costs and provide momentum to finish out the year.

Conference CallNortech Systems will hold a conference call at 10:00 a.m. (CST) on Thursday, November 15, 2018, to discuss the company’s third quarter results. Anyone interested in participating in the conference can access the call by dialing 877-407-0782 from within the United States, or 201-689-8567 if calling internationally.

An audio webcast and replay of this conference call can be accessed at the investor relations portion of Nortech Systems’ website at www.nortechsys.com or at www.investorcalendar.com. The telephone replay will be available through November 29, 2018, by dialing 877-481-4010 (from U.S.) or 919-882-2331 (International). To access the replay, the conference PIN #40286 is required.

About Nortech Systems IncorporatedNortech Systems Incorporated (www.nortechsys.com), based in Maple Grove, Minn., is a full-service electronics manufacturing services (EMS) provider of wire and cable assemblies, printed circuit board assemblies and higher-level complete box build assemblies for a wide range of industries. Markets served include industrial, medical and aerospace/defense. The company has operations in the U.S., Mexico and China. Nortech Systems Incorporated is traded on the NASDAQ Stock Market under the symbol NSYS.

Forward-Looking StatementsThis press release contains forward-looking statements made pursuant to the safe harbor provision of the Private Securities Litigation Reform Act of 1995. While this release is based on management’s best judgment and current expectations, actual results may differ and involve a number of risks and uncertainties. Important factors that could cause actual results to differ materially from the forward-looking statements include, without limitation: volatility in market conditions which may affect market supply of and demand for the company’s products; increased competition; changes in the reliability and efficiency of operating facilities or those of third parties; risks related to availability of labor; commodity and energy cost instability; general economic, financial and business conditions that could affect the company’s financial condition and results of operations; as well as risk factors listed from time to time in the company’s filings with the SEC.

         

Condensed Consolidated Statements of Operations(in thousands, except for share data)

As Reported As Reported Pro Forma as if the previous accounting guidance was in effect THREE MONTHS ENDED NINE MONTHS ENDED

THREEMONTHSENDED

NINEMONTHSENDED

SEPTEMBER 30, SEPTEMBER 30, SEPTEMBER 30, Unaudited   Unaudited Unaudited   Unaudited Unaudited   Unaudited 2018 2017 2018 2017 2018 2018   Net Sales $ 29,558 $ 28,310 84,543 $ 86,762 27,665 $ 80,323   Cost of Goods Sold 26,171   24,794   74,311   76,789   24,454   70,291     Gross Profit 3,387   3,516   10,232   9,973   3,211   10,032   11.5 % 12.4 % 12.1 % 11.5 % 11.6 % 12.5 %   Operating Expenses Selling Expenses 717 1,144 2,792 3,676 717 2,792 General and Administrative Expenses 2,021 2,088 6,177 6,152 2,021 6,177 Gain on Sale of Property and Equipment -   -   -   (355 ) -   -   Total Operating Expenses 2,738   3,232   8,969   9,473   2,738   8,969     Income From Operations 649   284   1,263   500   472   1,063     Other Expense Loss on Extinguishment of Debt - - - (175 ) - - Interest Expense (170 ) (172 ) (551 ) (453 ) (170 ) (551 )   Income (Loss) Before Income Taxes 479 112 712 (128 ) 303 512   Income Tax Expense (Benefit) 115   69   350   (141 ) 115   350     Net Income $ 364   $ 43   362   $ 13   188   $ 162     Income Per Common Share - Diluted $ 0.14   $ 0.02   0.13   $ 0.00   0.07   $ 0.06     Weighted Average Number of Common Shares Outstanding - Diluted 2,682,901   2,748,533   2,702,503   2,748,973   2,682,901   2,702,503        

Condensed Consolidated Balance Sheets(in thousands)

SEPTEMBER 30, 2018 DECEMBER 31, 2017 Unaudited Audited Cash $ 397 $ 473 Restricted Cash 236 306 Accounts Receivable 18,979 17,417 Inventories 15,236 18,527 Contract Assets 7,076 - Prepaid Expenses and Other Current Assets 1,380 1,044 Property and Other Long-term Assets 10,124 10,204 Goodwill and Other Intangible Assets, Net 3,953 4,114 Total Assets $ 57,381 $ 52,085   Accounts Payable $ 16,887 $ 11,699 Other Current Liabilities 6,222 6,346 Long Term Line of Credit 8,058 8,503 Long-term Debt and Other Long-term Liabilities 4,931 5,712 Shareholders’ Equity 21,283 19,825 Total Liabilities and Shareholders’ Equity $ 57,381 $ 52,085  

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Connie BeckNortech Systems Incorporated(952) 345-2244orWarren DjerfBrookside Communications Group952-920-3908 / warren@brookcomm.net